GBP/USD - Focus on UK manufacturing and trade data

Bank of England's hawkish tilt pushed the GBP/USD higher to 1.4067 yesterday, however, the risk aversion played a spoilsport and cable fell back to 1.3920.

That said, the British Pound could still put on a stellar performance if the UK data due today betters estimates and the global equity markets regain poise.

The UK manufacturing production is seen rising 0.3 percent m/m in December vs. 0.4 percent in November, while the industrial production is expected to have dropped 0.9 percent m/m. Further, the UK Office for National Statistics will likely report a small drop in the December trade deficit.

Yesterday, the BOE suggested the interest rates could be raised faster than previously indicated. An upbeat UK data would boost expectations of faster rate hikes (as suggested by the BOE) and push GBP/USD back to 1.4067 (previous day's high).

On the other hand, a combination of weak UK data and worsening risk aversion could end up pushing GBP/USD down to 4-hour 200-MA of 1.3798. Moreover, GBP still ranks last on the list of anti-risk currencies and thus Cable could feel the heat of drop in the GBP/JPY (due to risk-off).

GBP/USD Technical Levels

Valeria Bednarik, Chief Analyst at FXStreet, writes, " The US session low at 1.3890 is now the immediate support, with a break below the level probably favoring a retest of the 1.3830/40 region, where the pair bottomed multiple times this week."

Support levels: 1.3890 1.3860 1.3835

Resistance levels: 1.3960 1.4000 1.4055